Stamford, Conn.-based Citizens, parent of Kauai Electric Co., took a big step in that direction yesterday when it announced that it was buying local gas utility Gasco Inc. from BHP Hawaii Inc. for $100 million, in a deal that nearly quadruples Citizens' number of customers in the state. The acquisition requires the approval of state and federal regulators.
Congress is expected to end monopolies on power sales over the next several years, just as it has deregulated the nation's telecommunications industry. Many of Gasco's 70,000 local customers rely on HEI's Hawaiian Electric Co., Maui Electric Co. and Hawaii Electric Light Co. units for their electrical needs and many would be potential electric customers for Citizens once deregulation occurs.
The HEI utilities provide electricity for about 95 percent of the state's population.
"The days of captive markets are essentially over," said Brigid Smith, Citizens' spokeswoman. "We firmly believe that deregulation and competition is here and we will benefit."
Chuck Freedman, Heco spokesman, said it is premature to respond to Citizens' comments, which he described as hypothetical. He noted that Heco already has competition from Gasco.
Congress is considering bills to deregulate the nation's electric utilities but is several years away from passing major legislation, said Dave Otto, analyst for the Edward Jones stock brokerage in St. Louis.
Otto said that deregulation of the electric utilities likely will have a bigger impact on the mainland than in Hawaii given the state's location in the middle of the Pacific and the costs of building a new power plant. But he said Honolulu is a large enough for competition.
Depending on the form of that deregulation takes, local consumers could enjoy lower electricity rates in a competitive market, said Maurice Kaya, who heads the state Department of Business, Economic Development and Tourism's energy division.
"The potential benefits of competition are too important to ignore from a consumer's standpoint," said Kaya.
Citizens, founded in 1935, is a diversified public utility company that provides electric, telecommunications, gas, water and wastewater services to 1.8 million customers in 20 states.
The company, which had $1 billion in annual revenues in 1995, has owned Kauai Electric since 1969.
The Gasco sale will be watched closely by state Consumer Advocate Chuck Totto. Gasco, which was founded in 1904 as the Honolulu Gas Co. has lost several corporate clients to Hawaiian Electric during the past few years, which could lead to higher gas rates for residential customers, Totto said.
Totto has been at odds with Citizens' mainland managers recently. In 1995, the company sought approval from the PUC to recover $38.8 million for damages Kauai Electric suffered from Hurricane Iniki.
Totto said the surcharge would give the company "excessive profits." Kauai Electric argued at the time that shareholders should not cover all of the costs. The PUC largely ruled against the company, granting only a portion of Citizens' request.